KOTOK: We Have Bigger Worries Than Greece, Portugal and Spain

In his latest column, Cumberland Advisors' founder David Kotok
advises his audience that the peripheral Eurozone countries are
already a lost cause; it is now Italy that has begun to
teeter.

Greece, he writes, is doomed. Portugal and Spain are already
getting killed in credit markets.

"Italy is the one to watch," he says. "It is the 800-pound
gorilla and it is sick."

Growth, deficits, demographics and a 120% debt-to-GDP ratio are
causing it to become unmoored.

Its economy is shrinking, not growing. It has failed
to rein back the public expenditures. Its demographic
composition is impossible to balance with a debt-to-GDP ratio
above 120%.

"Credit spreads with Italy are widening. I recall that the
difference between the ten-year German bond yield and the
ten-year Italian bond yield once reached nine basis points. That
is correct: 9 basis points. The charts start on page
27 of my old book and depict the good old days. That was only 7
years ago. Look at today’s pricing vs. the old
pricing and play the movie backwards and one can see where this
is headed. Things are going to get worse."

Bottom line: "Italy is the world’s third largest
debtor. The test of 'too big to fail' will come with
Italy."